Commission and Fees in Ontario Explained
Commission is the largest single cost in most Ontario home sales and the least clearly explained. This guide sets out who pays, what is negotiable, how HST applies and what else you will be billed for. It quotes no rates, because there is no standard rate to quote.
How the money normally moves
- You and your listing brokerage agree a total commission, and it is recorded in the listing agreement along with everything else the brokerage is committing to.
- The listing brokerage typically offers a portion of that total to whichever brokerage brings the buyer.
- On closing, the commission is paid out of the sale proceeds, usually handled through the lawyers, so you do not write a separate cheque.
- Each brokerage then splits its share with the individual agent under whatever arrangement exists between them. That split is between the agent and their brokerage, and it does not change what you pay.
Buyers can also agree to compensate their own representative directly under a buyer representation agreement. Read that agreement carefully, including what happens if the seller side offers less than the amount you agreed to pay.
Structures you may be offered
| Structure | How it works | Worth checking |
|---|---|---|
| Percentage of sale price | The most common arrangement. A percentage of the final sale price. | Whether the percentage changes at a price threshold. |
| Flat fee | A fixed dollar amount regardless of sale price. | Exactly which services are included, and what is billed separately. |
| Tiered or split rate | One rate to a threshold, a different rate above it. | How the tiers interact, and run the maths at your likely price. |
| Reduced rate if unrepresented buyer | A lower total where no buyer brokerage is involved. | How it is documented, and what representation the buyer then has. |
HST
HST at 13 per cent applies to real estate commission in Ontario. It is a fee for a service, so it is taxed like one. When comparing quotes, establish whether each figure is quoted before or after HST. Two agents quoting what sounds like the same fee can differ by that margin purely because one quoted inclusive and the other did not.
Note that HST on commission is a separate question from HST on the property itself. Resale residential homes are generally exempt, but newly built homes are not, and the rules there are more involved. Ask your lawyer.
Other costs sellers face
- Legal fees and disbursements for the closing.
- Mortgage discharge or penalty if you are breaking a term early. Ask your lender for the figure in writing before you list.
- Staging, photography and marketing. Sometimes included in the commission, sometimes billed separately. Get it in writing.
- Repairs and pre listing work.
- Adjustments on closing for property tax, utilities and similar, prorated to the closing date.
Other costs buyers face
- Land transfer tax. Ontario charges provincial land transfer tax on residential purchases. Markham is in York Region and does not levy the additional municipal land transfer tax that applies within the City of Toronto, which is a meaningful difference if you are comparing a Markham property against one just across Steeles Avenue. First time buyers may be eligible for a provincial refund.
- Legal fees and disbursements, including title search and registration.
- Title insurance.
- Home inspection, and any specialist inspections.
- Appraisal, where your lender requires one.
- Mortgage default insurance where your down payment is below the threshold requiring it.
- Adjustments on closing, and moving costs.
- Status certificate if you are buying a condominium. Your lawyer will want to review it.
What to settle before you sign
- The total commission, and whether the figure quoted includes HST.
- Precisely what the fee covers, and what is billed on top.
- The term of the agreement.
- The holdover period and its exact wording.
- How you end the agreement early, and what that costs.
- Whether the brokerage uses designated representation, and what happens if the buyer comes from the same brokerage.
- Whether any referral fee is payable to a third party in connection with your transaction.
Common questions
Is there a standard real estate commission rate in Ontario?
No. There is no standard, fixed or official rate anywhere in Ontario. Commission is negotiated between a seller and a brokerage and is set out in the listing agreement. Any agent who tells you a rate is standard or fixed is wrong. Rates being set collectively would raise competition law problems, which is precisely why no such rate exists.
Who actually pays the commission?
In the common Ontario arrangement the seller agrees a total commission with their listing brokerage in the listing agreement, and the listing brokerage offers part of it to the brokerage that brings the buyer. The money comes out of the sale proceeds on closing. Buyers can also agree to pay their own representative directly under a buyer representation agreement, and that arrangement has been getting more attention since TRESA came into force.
Is HST charged on real estate commission?
Yes. Commission on a residential resale transaction in Ontario is a service and HST applies to it at 13 per cent. When you compare quotes, check whether each figure is quoted before or after HST, because that alone can make two identical offers look different.
Can I negotiate commission?
Yes, and you should at least discuss it. Because there is no standard rate, everything about the fee is open to negotiation, including the total, how it is split, whether it is a flat fee or a percentage, and whether it varies depending on how the buyer is found. What matters is comparing the fee against the service being offered rather than treating the lowest number as the best deal.
What is a holdover clause?
A holdover clause in a listing agreement says that if your property sells within a defined period after the agreement ends, to someone the brokerage introduced during the term, commission is still payable. It is a normal clause and it exists to stop a seller waiting out the agreement to avoid the fee. Read the period and the wording before you sign, because holdover lengths vary.
What did TRESA change about how agents work?
The Trust in Real Estate Services Act replaced the previous legislation governing Ontario real estate registrants. Among other changes it permits designated representation, where named individual agents represent each client rather than the brokerage representing everyone, it revised the rules around multiple representation, and it introduced an obligation for registrants to provide consumers with a prescribed information guide before giving services. It also changed what can be disclosed about competing offers where the seller directs it. Ask any agent you interview how their brokerage operates under it.
Related
- Questions to ask before hiring Including the commission conversation
- How to choose an agent in Markham What separates one from another
This guide is general information about how fees are typically structured in Ontario. It is not legal, tax or financial advice, rates and rules change, and nothing here should be relied on for your transaction. Consult a lawyer, an accountant or your lender about your situation, and see the Real Estate Council of Ontario for guidance on registrant obligations.